Analyst: Bank Of Uganda Likely To Keep Key Lending Rate Unchanged

The Bank of Uganda (BoU) is likely to keep the Central Bank Rate (CBR), a benchmark lending rate for commercial banks unchanged at 10%, Stephen Kaboyo (in featured photo), an analyst and Managing Director at Alpha Capital Partners has said.

BoU Governor, Prof. Emmanuel Tumusiime-Mutebile is expected to issue the Monetary Policy Statement for December 2018 on Wednesday December 5, 2018.

In October, BoU increased the CBR by 1 percentage point to 10 percent. The Central Bank attributed the increase to the upward trajectory in inflation, with core inflation (excludes temporary price volatility as in the case of some commodities such as food items, energy products etc. It reflects the inflation trend in an economy) projected to rise above the target of 5 percent within the next 12 months.

“Gathering from the October CBR direction, it was obvious that BOU was concerned by the inflation outlook coupled with the depreciation of the shilling at the time. With the passage of time, the shilling has stabilized and continue to show an appreciation trend, while inflation seems to be somewhat subdue,” Kaboyo said.

He says growth looks set at 6%, while private sector credit increased to 12.2% going by September numbers.

“Taking all this into account, BOU may not have sufficient justification to tighten this time round and will likely keep the CBR unchanged, however the statement is likely to come out with a hawkish tone given BOU’s credentials on inflation,” Kaboyo concluded.